SUPERIOR COURT OF JUSTICE – ONTARIO

COMMERCIAL LIST

RE: In the matter of an application under section 192 of the Canada Business Corporations Act;

And in the matter of a proposed plan of arrangement involving Tigray Resources Inc.

Tigray Resources Inc., Applicant

BEFORE: D. M. Brown J.

COUNSEL: R. Cohen, for the Applicant

HEARD: March 28, 2014

REASONS FOR DECISION

Quorum provisions in an interim order in respect of a CBCA plan of arrangement

[1] Tigray Resources Inc. seeks an interim order in respect of a plan of arrangement pursuant to section 192(4) of the Canada Business Corporations Act, R.S.C. 1985, c. C-44.

[2] As Blair J. (as he then was) stated in Re First Marathon Inc., the purpose of an interim order “is simply to set the wheels in motion for the application process relating to the arrangement and to establish the parameters for the holding of shareholder meetings to consider approval of the arrangement in accordance with the statute.”[^1]

[3] In the present case, the evidence satisfied me that the proposed arrangement constitutes an “arrangement” within the meaning of CBCA s. 192(1) involving, as it will, an exchange of securities of a corporation for securities of another body corporate. Tigray filed evidence that it meet the solvency requirement contained in CBCA ss. 192(2) and (3), and the company will give notice of the proposed plan of arrangement not only to shareholders, but also to the option holders and warrant holders whose rights may be arranged by the proposed plan.

[4] My only purpose in writing a brief endorsement is to observe that the company has included in its motion a request that the interim order establish a quorum for the scheduled April 30, 2014 shareholders’ meeting of one (1) person present in person or represented by proxy at the opening of the meeting who is entitled to vote at the meeting either as a shareholder or proxyholder holding no less than 5% of the issued and outstanding common shares of Tigray, which number approximately 72,229,665. Those shares are listed on the TSX Venture Exchange.

[5] I will include such a quorum provision in the proposed interim order because the evidence disclosed that Tigray’s by-laws contain such a quorum level. I would observe, however, that the Supreme Court of Canada, in BCE Inc. v. 1976 Debentureholders, described the role of a court considering a request to approve a plan of arrangement as follows:

In determining whether a plan of arrangement should be approved, the court must focus on the terms and impact of the arrangement itself, rather than on the process by which it was reached. What is required is that the arrangement itself, viewed substantively and objectively, be suitable for approval.[^2]

[6] The Supreme Court of Canada also stated that when undertaking the “fair and reasonable” analysis of a proposed plan of arrangement and considering whether the objections of those whose rights are being arranged are being resolved in a fair and balanced way, a court should consider the results of the shareholders’ vote on the plan:

An important factor is whether a majority of security holders has voted to approve the arrangement. Where the majority is absent or slim, doubts may arise as to whether the arrangement is fair and reasonable; however, a large majority suggests the converse. Although the outcome of a vote by security holders is not determinative of whether the plan should receive the approval of the court, courts have placed considerable weight on this factor. Voting results offer a key indication of whether those affected by the plan consider it to be fair and reasonable…[^3]

[7] For the vote by shareholders to carry evidentiary weight in the fair and reasonable analysis, a court must be satisfied that a significant enough number of shareholders actually voted on the plan. Where, as in the present case, the applicant seeks to set the quorum for the shareholders’ approval meeting at such a low level of 5% (albeit a level sanctioned by the corporate by-laws), the fact that a simple quorum was met and a vote held may not carry much evidentiary weight in the fair and reasonable analysis ultimately conducted by the court when considering a request for a final approval order.

[8] In the present case, the results of the voting will be known in late April, and for the present purposes of an interim order, I will include the requested 5% quorum for the shareholders’ meeting in the order.

[9] Accordingly, an interim order shall go in accordance with the draft filed, which I have signed.

D. M. Brown J.

Date: March 28, 2014

[^1]: 1999CarswellOnt 2295 (S.C.J.), para. 9.

[^2]: 2008 SCC 69, para. 135 (emphasis added).

[^3]: Ibid., para. 150.